10宏观经济学英文版多恩布什课后习题答案全解.docx

10宏观经济学英文版多恩布什课后习题答案全解.docx

《10宏观经济学英文版多恩布什课后习题答案全解.docx》由会员分享，可在线阅读，更多相关《10宏观经济学英文版多恩布什课后习题答案全解.docx（23页珍藏版）》请在冰豆网上搜索。

10宏观经济学英文版多恩布什课后习题答案全解

CHAPTER10

MONEY,INTEREST,ANDINCOME

AnswerstoProblemsintheTextbook:

ConceptualProblems:

1.ThemodelinChapter9assumedthatboththepricelevelandtheinterestratewerefixed.ButtheIS-LMmodelletstheinterestratefluctuateanddeterminesthecombinationofoutputdemandedandtheinterestrateforafixedpricelevel.Itshouldbenotedthatwhiletheupward-slopingAD-curveinChapter9（the[C+I+G+NX]-lineintheKeynesiancrossdiagram）assumedthatinterestratesandpriceswerefixed,thedownward-slopingAD-curvethatisderivedattheendofChapter10fromtheIS-LMmodelletsthepricelevelfluctuateanddescribesallcombinationsofthepricelevelandthelevelofoutputdemandedatwhichthegoodsandmoneysectorsimultaneouslyareinequilibrium.

2.a.Iftheexpendituremultiplier（）becomeslarger,theincreaseinequilibriumincomecausedbyaunitchangeinintendedspendingalsobecomeslarger.Assumeinvestmentspendingincreasesduetoachangeintheinterestrate.Ifthemultiplierbecomeslarger,anyincreaseinspendingwillcausealargerincreaseinequilibriumincome.ThismeansthattheIS-curvewillbecomeflatterasthesizeoftheexpendituremultiplierbecomeslarger.

Ifaggregatedemandbecomesmoresensitivetointerestrates,anychangeintheinterestratecausesthe[C+I+G+NX]-linetoshiftupbyalargeramountand,givenacertainsizeoftheexpendituremultiplier,thiswillincreaseequilibriumincomebyalargeramount.Asaresult,theIS-curvewillbecomeflatter.

2.b.Monetarypolicychangesaffectinterestratesandthisleadstoachangeinintendedspending,whichisreflectedinachangeinincome.In2.a.itwasexplainedthatasteepIS-curvemeanseitherthatthemultiplierissmallorthatdesiredspendingisnotveryinterestsensitive.Therefore,anincreaseinmoneysupplywillreduceinterestrates.However,thisdoesnotresultinalargeincreaseinaggregatedemandifspendingisveryinterestinsensitive.Similarly,ifthemultiplierissmall,thenanychangeinspendingwillnotaffectoutputsignificantly.Therefore,thesteepertheIS-curve,theweakertheeffectofmonetarypolicychangesonequilibriumoutput.

3.Assumethatmoneysupplyisfixed.Anyincreaseinincomewillincreasemoneydemandandtheresultingexcessdemandformoneywilldrivetheinterestrateup.This,inturn,willreducethequantityofmoneybalancesdemandedtobringthemoneysectorbacktoequilibrium.Butifmoneydemandisveryinterestinsensitive,thenalargerincreaseintheinterestrateisneededtoreachanewequilibriuminthemoneysector.Asaresult,theLM-curvebecomessteeper.

AlongtheLM-curve,anincreaseintheinterestrateisalwaysassociatedwithanincreaseinincome.Thismeansthatanincreaseinmoneydemand（duetoanincreaseinincome）hastobeoffsetbyadecreaseinthequantityofmoneydemanded（duetoanincreaseintheinterestrate）tokeepthemoneysectorinequilibrium.Butifmoneydemandbecomesmoreincomesensitive,asmallerchangeinincomeisrequiredforanyspecificchangeintheinterestratetokeepthemoneysectorinequilibrium.Therefore,theLM-curvebecomessteeperasmoneydemandbecomesmoreincomesensitive.

4.a.AhorizontalLM-curveimpliesthatthepubliciswillingtoholdwhatevermoneyissuppliedatanygiveninterestrate.Therefore,changesinincomewillnotaffecttheequilibriuminterestrateinthemoneysector.Butiftheinterestrateisfixed,wearebacktotheanalysisofthesimpleKeynesianmodelusedinChapter9.Inotherwords,thereisnooffsettingeffect（orcrowding-outeffect）tofiscalpolicy.

4.b.AhorizontalLM-curveimpliesthatchangesinincomedonotaffectinterestratesinthemoneysector.Therefore,ifexpansionaryfiscalpolicyisimplemented,theIS-curveshiftstotheright,butthelevelofinvestmentspendingisnolongernegativelyaffectedbyrisinginterestrates,thatis,thereisnocrowding-outeffect.IntermsofFigure10-3,theinterestratenotlongerservesasthelinkbetweenthegoodsandassetsmarkets.

4.c.AhorizontalLM-curveresultsifthepubliciswillingtoholdwhatevermoneybalancesaresuppliedatagiveninterestrate.Thissituationiscalledtheliquiditytrap.Similarly,iftheFedispreparedtopegtheinterestrateatacertainlevel,thenanychangeinincomewillbeaccompaniedbyanappropriatechangeinmoneysupply.ThiswillleadtocontinuousshiftsintheLM-curve,whichisequivalenttohavingahorizontalLM-curve,sincetheinterestratewillneverchange.

5.Fromthematerialpresentedinthetextweknowthatwhenintendedspendingbecomesmoreinterestsensitive,thentheIS-curvebecomesflatter.Nowassumethatanincreaseintheinterestratestimulatessavingandthereforereducesthelevelofconsumption.Thismeansthatnownotonlyinvestmentspendingbutalsoconsumptionisnegativelyaffectedbyanincreaseintheinterestrate.Inotherwords,the[C+I+G+NX]-lineintheKeynesiancrossdiagramwillnowshiftdownfurtherthanpreviouslyandthelevelofequilibriumincomewilldecreasemorethanbefore.Inotherwords,theIS-curvehasbecomeflatter.

Thiscanalsobeshownalgebraically,sincewecannowwritetheconsumptionfunctionasfollows:

C=C*+cYD-gi

Inasimplemodeloftheexpendituresectorwithoutincometaxes,theequationforaggregatedemandwillnowbe

AD=Ao+cY-（b+g）i.

FromY=AD==>Y=[1/（1-c）][Ao-（b+g）i]==>

i=[1/（b+g）]Ao-[（1-c）/（b+g）]Y

Therefore,theslopeoftheIS-curvehasbeenreducedfrom（1-c）/bto（1-c）/（b+g）.

6.IntheIS-LMmodel,asimultaneousdeclineininterestratesandincomecanonlybecausedbyashiftoftheIS-curvetotheleft.ThisshiftintheIS-curvecouldhavebeencausedbyadecreaseinprivatespendingduetonegativebusinessexpectationsoradeclineinconsumerconfidence.In1991,theeconomywasinarecessionandfirmsdidnotwanttoinvestinnewmachineryand,sinceconsumerconfidencewasverylow,peoplewerenotexpectedtoincreasetheirlevelofspending.IntheIS-LMdiagramtheadjustmentprocesscanbedescribedasfollows:

Io==>Y（theIS-curveshiftsleft）==>md==>i==>I==>Y.Effect:

Yandi.

iISoLM

IS1

i1

i2

0

Y2Y1Y

TechnicalProblems:

1.a.EachpointontheIS-curverepresentsanequilibriumintheexpendituresector.ThereforetheIS-curvecanbederivedbysetting

Y=C+I+G=（0.8）[1-（0.25）]Y+900-50i+800=1,700+（0.6）Y-50i==>

（0.4）Y=1,700-50i==>Y=（2.5）（1,700-50i）==>Y=4,250-125i.

1.b.TheIS-curveshowsallcombinationsoftheinterestrateandthelevelofoutputsuchthattheexpendituresector（thegoodsmarket）isinequilibrium,thatis,intendedspendingisequaltoactualoutput.Adecreaseintheinterestratestimulatesinvestmentspending,makingintendedspendinggreaterthanactualoutput.Theresultingunintendedinventorydecreaseleadsfirmstoincreasetheirproductiontothepointwhereactualoutputisagainequaltointendedspending.ThismeansthattheIS-curveisdownwardsloping.

1.c.EachpointontheLM-curverepresentsanequilibriuminthemoneysector.ThereforetheLM-curvecanbederivedbysettingrealmoneysupplyequaltorealmoneydemand,thatis,

M/P=L==>500=（0.25）Y-62.5i==>Y=4（500+62.5i）==>Y=2,000+250i.

1.d.TheLM-curveshowsallcombinationsoftheinterestrateandlevelofoutputsuchthatthemoneysectorisinequilibrium,thatis,thedemandforrealmoneybalancesisequaltothesupplyofrealmoneybalances.Anincreaseinincomewillincreasethedemandforrealmoneybalances.Givenafixedrealmoneysupply,thiswillleadtoanincreaseininterestrates,whichwillthenreducethequantityofrealmoneybalancesdemandeduntilthemoneymarketclears.Inotherwords,theLM-curveisupwardsloping.

1.e.Thelevelofincome（Y）andtheinterestrate（i）attheequilibriumaredeterminedbytheintersectionoftheIS-curvewiththeLM-curve.Atthispoint,theexpendituresectorandthemoneysectorarebothinequilibriumsimultaneously.

FromIS=LM==>4,250-125i=2,000+250i==>2,250=375I==>i=6

==>Y=4,250-125*6=4,250-750==>Y=3,500

Check:

Y=2,000+250*6=2,000+1,500=3,500

i

125IS

LM

6

0

2,0003,5004,250Y

2.a.Aswehaveseenin1.a.,thevalueoftheexpendituremultiplieris=2.5.ThismultiplierisderivedinthesamewayasinChapter9.Butnowintendedspendingalsodependsontheinterestrate,sowenolongerhaveY=Ao,butrather

Y=（Ao-bi）=（1/[1-c+ct]）（Ao-bi）==>Y=（2.5）（1,700-50i）=4,250-125i.

2.b.Thiscanbeansweredmosteasilywithanumericalexample.AssumethatgovernmentpurchasesincreasebyG=300.TheIS-curveshiftsparalleltotherightby

==>IS=（2.5）（300）=750.

ThereforeIS':

Y=5,000-125i

FromIS'=LM==>5,000-125i=2,000+250i==>375i=3,000==>i=8

==>Y=2,000+250*8==>Y=4,000==>Y=500

Wheninterestratesareassumedtobeconstant,thesizeofthemultiplierisequalto=2.5,thatis,（Y）/（G）=750/300=2.5.Butwheninterestratesareallowedtovary,thesizeofthemultiplierisreducedto1=（Y）/（G）=500/300=1.67.

2.c.SinceanincreaseingovernmentpurchasesbyG=300causesachangeintheinterestrateof2percentagepoints,governmentspendinghastochangebyG=150toincreasetheinterestrateby1percentagepoint.

2.d.Thesimplemultiplierin2.a.showsthemagnitudeofthehorizontalshiftintheIS-curve,givenachangeinautonomousspendingbyoneunit.Butanincreaseinincomeincreasesmoneydemandand